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| No traces of the past: Bethlehem steel facility before demolition (SUN photo) |
When only six years later Aaron Tomarchio, Senior executive in administration, government relations, communications and public affairs of a company called Tradepoint Atlantic, steers his company SUV to the gate which secures the southern end of one of the country's largest brown-fields, not only have almost all traces of the steel heritage have been demolished, imploded, leveled or turned into scrap but a new form of economy has begun to shape the peninsula in a very different way.
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| A low slung new profile at Tradepoint Atlantic: Approach road with shoulder, walk and bikeway, trees |
Tradepoint Atlantic is a small organization of only 75 people. Tomarchio reports to Hilco Global and Redwood Capital, the two investment firms which bought the old Bethlehem Steel plant after some other property transfer in 2013 from Environmental Liability Transfer Inc.in 2014 for a mere $100 million. In spite of the large amounts of foreign capital sloshing around the globe funding many large investments in the US, Tomarchio assures here it’s all local! The main investor actually lives in Baltimore County he laughs, the same county in which Sparrows Point is located. Jim Davis, the main investor also owns in Redwood, Allegis, and Erickson, an investment company, a staffing brokerage and a retirement home operator. (A detailed expose about him can be found in the Baltimore Business Journal). Allegis is the largest private company in Maryland with revenue reaching $11.5 billion in 2016.
A very small part the new economy is like the old. 25 employees run a short-line railroad. There are still 100 miles of usable railroad track on Sparrow's Point which the investors bought lock, stock and barrel, including five engines which already ply the tracks, repainted and rebranded in the Tradepoint colors. Fixing up rusty tanker rail-cars from other rail companies is only a temporary way to use the rail facilities. The bigger idea is taken from Bethlehem Steel's playbook: Transfer to CSX and Norfolk Southern in an adjacent transfer yard providing rail access to the entire country.
The new economy is completely different though: The Tradepoint owners have identified distribution warehousing as the particular niche for this land, the huge nearby population centers, the size of the available property, and the existing land, sea and rail shipping modes made the site destined for it. Distribution is a hot commodity all along the Atlantic coast and North America, but there is hardly another site which combines deep water access, interstates and direct railroad access in one centrally located place of this size.
Regret that no old structures found a new use are met with a shrug: Too costly, too impractical. It is clear, the team is looking forward, not back and its mindset is engineering and economics, not design and city building. What gets the new owners excited are features like a protected deep-water shipping basin (to be stabilized with a $20 million federal TIGER grant) and a long finger pier allowing for a total of 5 shipping berths which will be dredged to up to 47' depth, allowing the biggest ships to dock. The dredging will be paid by Tradepoint, the spoils will be deposited in coordination with the State's Port Authority and their dredging efforts. The large cranes on the pier were removed because they were specialized for steel and didn't work to unload other bulk cargo, Tomarchio explains, a bit exasperated by the constant search for artifacts which could have remained as witnesses to the history of steel making.
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| a 3250 acre peninsula tethered to the Baltimore beltway and jutting into the Patapsco River where it enters the Chesapeake Bay |
Is Tradepoint Atlantic competing with the Port of Baltimore? No, Tomarchio says, "we are working with the Port" which is out of space on its Baltimore city locations thanks to record business. The State run Port Authority is already directing some bulk cargo to Tradepoint just as County officials had envisioned when the future of Sparrows Point was debated after the demise of steel.
Thus 50 Tradepoint employees hold the strings for a future which affects Baltimore County, the Port of Baltimore, and the entire region. The peninsula already accommodates known brands such as Under Armour Fed Ex, Harley Davidson, and Amazon. Exactly 23% of the full capacity have already been built in only four years. The final development is estimated to top out at around 14.4 million square feet.
Success stories about the redevelopment of the gigantic site have come in regularly, the Fed-Ex distribution center, a Pasha car import operation, a huge 1,3 million square-foot Under Armour distribution center and the 857,500-square-foot Amazon "Fulfillment Center" about to be opened have attracted ribbon cutting politcians, the media and the interest of businesses.
Those distribution warehouse facilities alone will shortly employ more workers than RG Steel had in its final years. In the complete build-out, Tradepoint Atlantic employment will be around 10,000 people, a third of the 30,000 workers that found employment at Bethlehem Steel during the peak of steel production here, but a significant employment center, nevertheless.
The new site owners immediately understood that the historic name "Sparrows Point" did not properly convey the giant scale of their hlding. 3,250 acres, that isn't just a point for a tiny bird. So they called the place"Tradepoint Atlantic", a much more sweeping name for one of the best development sites on the entire Atlantic sea-board of North America.
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| Recent aerial view before Amazon was completed |
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| Room for big ships. Unloading with their own rigs |
Woven in between the shiny new warehouses and enterprises are business opportunities that arise during the transition. The enterprise of fixing up railcars is such an opportunity, on-site facilities which turn rubble into crusher run for roads and parking lots another, so is a legacy scrap-yard as well as being landlord for a Baltimore County public works yard and a fire station. The site also hosts a basin for the treated water of a large city/county sewage treatment plant (during steel production the water had been used for cooling and processing) and accommodates space for over 20,000 Volkswagen TDI Diesels which the German car maker had to buy back as part of a settlement with the US Department of Justice because of cheater software they used to "pass" emission tests. The ultimate fate of the cars is unknown as of yet. On the giant peninsula those acres of cars are only a spec in the landscape.
Facing the outlying areas of the community of Edemere across the Jones Creek waterway, are even two yacht clubs. They are part of a larger green buffer which is, however, bisected by a railyard and a road. All is part of Tradepoint's territory. Wouldn't this be a great area for recreational trails that could loop through the peninsula providing amenities for employees and nearby residents alike? Tomarchio looks non-committal. Yes, he admits, that could be nice and quickly adds, that already the new roads are equipped with separated walk-bike-ways. "This isn't Port Covington", he points out several times, referring to plans of Under Armour's Kevin Plan for a new town on an old coal transfer rail yard in Baltimore city. Tradepoint Atlantic "is an industrial development with large trucks".
The hard route from steel to trade and distribution includes clean up. The current owners not only have to clean up contamination in according to a consent decree with the Environmental Protection Agency (EPA) which they inherited upon purchase and then modified, but they had to remove the wreckage of blast furnaces and re-build infrastructure from the ground up. Tomarchio says that there are no really bad pollutants, "just the residue from more than a century of industrial production". The consent decree contains an impressive alphabetical list including arsenic, cadmium, chromium, copper, iron, lead, manganese, nickel, tin, ammonia, benzene, cyanide, ethylene glycol, hydrogen cyanide, hydrogen sulfide, naphthalene, polycyclic aromatic hydrocarbons, polychlorinated biphenyls, pentachlorophenol, phenols, pyrene, sodium phenolate, styrene, sulfuric acid, toluene, trichloroethylene, xylene, coal tar, oils, lime sludge, waste alkaline rinses, and mill scale all detailed in a 135 page "phase 1" environmental report. Some of the soils are removed, some are capped, requirements vary by location. In 2014 TradePoint agreed to allocated $48 million for cleanup.
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| Lots of infrastructure: Railroad, water treatment plant |
One of the challenges is stormwater management. The Maryland Department of the Environment (EPA) has strict standards which are hard to meet with uses that entail huge roofs, impervious truck loading areas and gigantic paved parking lots. About one half of the site is drained via sheet-flow into the Tin Mill Canal, a legacy ditch which served the same purpose during steel production and is now the focus of clean-up. Then and now the canal directs contaminated water into a waste-water treatment plant equipped to deal with oil, fuel and other pollutants that have to removed before the water can be released into the Chesapeake Bay.
The #63 Baltimore transit bus has already began to loop through the site but even with the smaller employment it is no match for the streetcars that began serving the steel plant as early as 1907. Whatever remaining workforce housing in surrounding communities isn't up to par with current standards. Yet, no housing is planned in Tradepoint Atlantic's masterplan. The distribution centers are simple large warehouses with barely any architecture. But they are filled with the latest in storage technology, logistics software and robots. People are rare in those places where no goods are made but simply stored and assigned to destinations.
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| the old power plant in the process of being dismantled |
There certainly can be debate whether the economy of distribution warehouses and fulfillment centers is a worthy successor to steel making. The necessary skills are relatively low, so are the wages. Automation will take a further bite out of whatever workforce there is planned for now. A study of the Economic Policy Institute published in February of this year was titled "Unfulfilled promises" and stated that Amazon centers "do not generate broad-based employment".
Two years after an Amazon fulfillment center opens in a county, overall private-sector employment in the county has not increased. It is possible that the jobs created in the warehousing and storage sector are offset by job losses in other industries, or that the employment growth generated by Amazon is too small to meaningfully detect in the data. This finding of no effect is also robust to a series of statistical controls.
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| Salvaged Bethlehem star waiting for re-use |
Small in comparison to the huge incentive packages for Amazzon's famous HQ2, Baltimore County and the State have tied some $19 million in incentives to the 1,500 jobs promised for the Amazon fulfillment center. Additionally, Tradepoint will seek tax increment financing from Baltimore County, "it will probably be about $120 million in TIF money", Tomarchio says ( a number that is a bit lower than the publicly announced amount of $150 million). The TIF request was made public in July and a document outlining it from Tradepoint's perspective can be found here.The $120 million number is derived from the total cost of the necessary infrastructure, including roads, sewers, water lines and pumping stations, improved interchanges and enhancements such as bike and walkways. Some of it has already been constructed. "We expect some reimbursement", Tomarchio explains. The justification for the TIF to fund infrastructure that has no public use is the economic development it spawns. That number is estimated to be a total of $2.9 billion through direct and indirect economic activity by the local Sage Policy Group. Especially indirect economic benefits are always hard to verify.
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| An inkling of the future. Trucks and more trucks |
"To put into perspective the projected impacts of this project, Tradepoint stands to add a full percentage point to gross state product by 2025." (Anirban Basu, 2016)Having devoted the vast once fertile and lush peninsula to just one type of business before, another mono-culture which could crash should be avoided.
Now that the owners of the site have indicated that they would like to have the new infrastructure financed by the public through TIF, Baltimore County should consider a few conditions before they say yes to the request.
There is plenty they could ask for: The almost complete absence of public participation in the determination of the future of Sparrow's Point is somewhat alarming, even though Tomarchio assures that dialogue with nearby communities is well underway. Owning the property fair and simple, the owners have pretty much unfettered rights to do what is allowed under zoning as long as they follow the EPA mandated cleanup. But with the TIF, the County could ask for good public access, recreational loops and waterfront promenades, shuttle transit services, use of renewable solar energy on the vast warehouse roofs as a condition of future permits (Amazon apparently considers a retrofit of their completed mega warehouse) and an accelerated payback of the TIF bonds if the peninsula keeps filling up at the current rate. Basu expected in 2016 an annual County tax benefit of $26 million after full build out. This suggests that tax payers would have to foot the TIF bonds for a while, especially since usually not all of the additional tax revenues are set aside for repayment. The TIF request is currently studied by the County's own economic consultant. County council members reserve judgement until they have seen the analysis.
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| Masterplan: Top warehouses, bottom: Shipping |
Driving back from Sparrows Point the roads are wide and plentiful, a legacy from the time when Sparrows Point was the largest employer for the region. (Today this is Johns Hopkins). With all the distribution warehouses, the roads will soon see an onslaught of trucks which could be problematic a bit further out in the highly congested metro area. relief from freight railroads will come in handy and mode split could also be a topic of the TIF negotiations.
Even if the new facilities pretty much look like any other distribution center, the mix of possibilities and the fantastic waterfront location provide an exciting glimpse into tomorrow's economy.
Klaus Philipsen, FAIA
Links:
A look inside Amazon.com's new Sparrows Point fulfillment center. Business Journal
Amazon offers sneak peek at massive high-tech fulfillment center opening soon at Sparrows Point, SUN
Tour of new Amazon Fulfillment Center, Baltimore SUN video
Previous article on this blog:
Tradepoint Atlantic: Missing an Opportunity? 2016
Megalomania brought steel down and wants to bring it back
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